Monday, July 13, 2015

Amity Shlaes takes a cue from the Washington Nationals, who recently
introduced "Silent Cal" (Coolidge) as a mascot, and compares the
economic policies of our thirtieth President to those of his
predecessor and successor. Specifically, she notes that lower income
taxes spurred prosperity and speculates on why:

... A
government that cut tax rates sent a positive signal to business,
saying in effect: "We will stay out of your way." Coolidge certainly
agreed, labeling excessive taxation "legalized larceny."

Harding, [Andrew] Mellon and Congress cut the top rate to
58%. And that might have been end of it, for Harding proved more
interested in other projects. But Harding died suddenly in
1923.

Tax cuts suited Coolidge's dry New England
temperament, and he took to the project with grim
determination. Mellon, glad to have an energetic partner, rallied and
in April 1924 published a book, Taxation: The People's
Business, to share with the public the administration
theories.

Mellon and Coolidge formed a sort of relay team,
and together managed to bully a skeptical Congress into lowering the
top rate to 46%. Not stopping there, Coolidge and Mellon agitated
further. In 1926 Congress passed a law that lowered the capital gains
rate to 25%.

Anxious, the pair pored over the tax data to
see if their theory of strong revenues after rate cuts held up. In
1923 the federal government took in $662 million in income tax. The
next year the figure was $704 million, and the next, $735 million. By
the late 1920s, revenues topped $1 billion. The progression upward was
uneven, but impossible to deny. [minor format edits]

This advocate of limited
government sees the data as a two-edged sword. Reducing tax rates on
the way to abolition of taxation will
have the added benefit of hastening a diminution of our sovereign
debt. At the same time, without an attempt at informing the public of
the moral case against taxation (and for proper limits on government)
a la Mellon's book, momentum can be lost as conditions improve, and
we'll be ripe for future generations to slide right back down the
slippery slope to serfdom as Shlaes notes FDR did.

Incidentally,
Coolidge's talk of "excessive" taxes concedes the premise that
taxation is just fine, and also reminds me of modern conservatives who
complain only of over-regulation.